Based on the meeting memorandum between the SEC and BlackRock, BlackRock has adjusted the mechanism of its Bitcoin spot ETF, allowing Authorized Participants (APs) to create new fund shares using cash instead of “crypto only”.
“Authorized Participants (APs)” are crucial components of the ETF ecosystem, with primary responsibilities including creating and redeeming ETF shares, maintaining liquidity and market prices, and market-making.
After BlackRock made this change to the mechanism, it opened the door for Wall Street banks to participate. Under US regulations, these banks face strict limitations on “directly holding cryptocurrencies”. Therefore, when BlackRock allows the creation of fund shares using cash, large banks like JPMorgan Chase or Goldman Sachs could act as APs for BlackRock’s Bitcoin spot ETF (whether they are willing to do so is another matter).
Previously, it was widely believed that the APs for these Bitcoin ETFs would be experienced crypto market makers like Jane Street, Jump Trading, and Virtu, rather than traditional banks. However, this change means that traditional large banks can also participate, potentially expanding the range of liquidity providers.
Sui Chung, CEO of CF Benchmarks, stated in an interview: